MBS RECAP: More Volatility, More Range-Holding Ahead of NFP

Miraculously (and sarcastically) bond markets were little-changed overnight.  The first cues for movement came from the ECB's press conference where Draghi was a bit more dovish than we've heard him recently.  The ECB president said that deflation is a risk and that the committee could consider extending purchases beyond the current September 2016 deadline if needed. 

While those sorts of future "maybes" aren't really meaningful in terms of policy guidance (they're too far out and too vague), European bond markets seemed pleased with the overall message.  German Bunds rallied noticeably, helping provide a mild boost for domestic bond markets in the opening hour. 

The European rally was tame enough that US bond markets didn't feel compelled to follow too closely.  Once 10yr yields approached the bottom of the recent range, the game was over.  A small burst of corporate bond offerings and another rally in oil prices helped push bonds all the way to the weaker side of the recent range.  Of course this doesn't mean much, given the narrowness of said range. 

Jobless Claims, International Trade, and ISM data were all inconsequential today.  It's actually fairly eerie.  We're either getting set up for a huge reaction to NFP tomorrow, or the focus is so firmly on the Fed meeting in 2 weeks that normally relevant data will have a hard time pushing us out of this range.

For what it's worth, MBS outperformed Treasuries over a 2-day period with both Fannie 3.5s and 3.0s making it to their best levels of the month.  Meanwhile, Treasury yields didn't break yesterday's lows.